8/13/2009 @ 2:00PM

Raising Financially Savvy Kids

It’s Friday afternoon, and Garrett Jay is surrounded by 30 kids at the mall. He’s not giving away tickets to the IMAX, but the adventure is about to begin. Garrett runs Money Lessons For Life, a business dedicated to teaching children the day-to-day issues of money, and these field trips help them experience that first hand.

At one of the country’s most popular shoe stores, a 12-year-old delivers the first lesson of the day to the rest of the group. “I have these shoes,” she says. “I never realized how expensive they are.” This is not only eye-opening for the other kids, but also a loud wake-up call to the parents in the group. Even more eyebrows are raised when a little elementary school math determines that it will take about 14 hours of work at that same mall to buy the shoes, and barely leave enough for a frappuccino stop at the food court. The connection between having what you want, and spending self-generated dollars to get it, becomes clear as a bell.

If your children are already adults, you may be thinking that such lessons will only benefit your grandchildren at some point. While a field trip to the mall or to the bank may not be the ticket for getting your adult son or daughter to make the most of what they earn and make smart choices with their money, it may help to look at what financial lessons and habits you helped them learn in their earlier years. Then take a look at what lessons you may be teaching them through their adulthood that could be either accelerating or stalling their financial success.

Maybe the little rewards for good grades during the early years helped your daughter reach the top of her class, while you proudly declared her honor roll achievements on your bumper. You knew all along that her impressive grades, as well as her roles as student council vice president, yearbook editor and captain of the basketball team would spice up her college applications, and you were elated when she was accepted to an Ivy League University that would pave the way for lucrative career opportunities and an upscale lifestyle for herself and, ultimately, for your grandchildren. Your wisdom and insight also helped her choose to study engineering, a career that should always be in high demand and would give her a chance to be among an elite group of well-paid professionals as soon as she graduated.

While it’s true that such opportunities can provide a great foundation for financial prosperity, they by no means guarantee your children will become financially secure–not by a long shot.

Our research indicates that a stable income by itself is no guarantee that someone will even be able to make ends meet. Only 70% of users of our online Financial Learning Center who earned between $100,000 and $150,000 per year reported having a handle on their cash flow and paying their bills on time. That’s barely a C-minus by elementary school standards for lower six-figure earners. (Those earning over $200,000 only get a B in the same category). The $100k to $150k group gets an F for paying off their credit card balances in full each month (only 51%), while the over-$200K group would get a C-plus.

It’s time to take a look at the impact that managing that paycheck has on your child’s success. Whether it was engineering, law school, medical school, business school or trade school, having a plan for turning that career into the proverbial goose will also involve a solid plan to repay any debt incurred for that great education, as well as a plan for growing their wealth through investing.

And don’t forget to manage the bottom line. A personal budget, while highly valuable for those having trouble making ends meet, is too often overlooked as a tool that can accelerate the path to prosperity, as the most successful businesses have already discovered. College graduates don’t put this type of education on their resume, but it can be even more valuable to them in the long run than their impressive GPA.

You can also teach by example. For those who regularly provide anything from occasional assistance to regular cash gifts to their adult children, consider the research provided in the personal finance classic, The Millionaire Next Door. Thomas Stanley and William Danko pointed out that one of the common denominators of people who successfully built wealth was that their own parents did not provide what the authors refer to as “economic outpatient care.” Many well-meaning and generous parents who were happy to pay a grandchild’s tuition or provide ongoing financial support for their own children’s lifestyles actually served to diminish the levels of determination and resourcefulness that could have translated into greater wealth in the long run.

Providing a helping hand, a springboard or a generous gift to your children or any member of your family can be a fulfilling experience. If your idea with your generosity is to help them “get going,” just make sure it’s in the intended direction. Your kindness as well as your wisdom can go a long way in helping your children build a foundation for sound money management. And if you want to take your benevolence to new heights:

–Teach them how you discovered the passion behind what is most important to you.

–Teach them how to discover their strengths and integrate that into how they earn a living. Teach them the joy of donating to charities or worthy causes.

–And teach them that they really can survive and even enjoy life only spending 80% of what they earn.

These will be true and lasting gifts.

Moms and dads have always been there on the day the training wheels come off, and many have experienced a Saturday afternoon running alongside the bike while pushing from the back of the seat, teaching both bike-riding and the lesson of “try-try again.” Other parents have taken the same opportunity to combine lessons of both determination and wisdom, and blend 50 feet of running with the most valuable and lasting advice: “You can make it from here, as long as you keep peddling.” A lesson for life for both the parent and the child.